By Jonnelle Marte
(Reuters) – A key Federal Reserve official told a congressional watchdog on Friday that participation in a $600 billion (460 billion pounds) loan programme meant to carry small and medium-sized firms through the coronavirus crisis would expand rapidly if the pandemic or economy worsened.
American businesses have tapped only a fraction of the funds available through the Main Street Lending Program launched by the U.S. central bank last month, spurring criticism the program was too restrictive and set up too late to help employers.
“Should the pandemic and the economy worsen, or financial institutions experience larger-than-expected loan losses and depletion of capital – all things we hope do not happen – then I would expect interest in using this program to expand more rapidly,” Boston Fed President Eric Rosengren said in testimony before the Congressional Oversight Commission, a bipartisan panel overseeing efforts by the Fed and Treasury Department to stabilise the economy during the crisis.
The Boston Fed is administering the Main Street programme.
More than $530 million in potential loans were active in the Main Street portal as of Aug. 4, representing 54 loans, Rosengren said. That includes $109 million in loans that have been settled with commitments for purchase, he said.
But some members of the commission, which includes two Republican lawmakers, a Democratic lawmaker and a Democratic political advisor, said businesses are already suffering, raising questions about whether the parameters of the programme were too restrictive.
“Main street companies are already getting crushed,” said Bharat Ramamurti, an attorney and former economic policy adviser for Senator Elizabeth Warren’s 2020 presidential campaign. Ramamurti cited surveys showing that companies are going ahead with layoffs and furloughs after suffering large drops in revenue.
“How much worse do things have to get before companies are interested in the Main Street Lending Program,” Ramamurti said.
The Fed this week disclosed details on some of the specific loans issued through the programme, under which it will buy 95% of a loan initiated by a private lender to a qualified business. The largest loan so far, worth $50 million, went to a resort in Pennsylvania’s Pocono Mountains, the Fed said. The next largest was the programme’s first-ever loan, $12.3 million to a dental practice network in Wisconsin.
Since registration opened in mid-June, 509 financial institutions have signed up with the Main Street Lending Program, Rosengren said. Only 153 lenders were willing to be part of a list on the Boston Fed’s website https://www.bostonfed.org/supervision-and-regulation/supervision/special-facilities/main-street-lending-program.aspx of lenders that are accepting new borrowers through the programme.
(Reporting by Jonnelle Marte; Editing by Paul Simao)
Video: Sell Gold Calls as Real Yields Stabilize, JPM’s Amoroso Says (Bloomberg)
Assessing the Rivalry Between U.S., Chinese Tech Giants
Aug.09 — Rebecca Fannin, founder of Silicon Dragon Ventures and author of “Tech Titans of China,” talks about the prospects for Beijing-based ByteDance Ltd.’s TikTok, the video-sharing app that the Trump administration has declared a national-security threat, and the rivalry between U.S. and Chinese technology companies. Twitter Inc. has held early talks about a potential combination with TikTok, Dow Jones reported, citing people familiar with the matter. Fannin speaks on “Bloomberg Markets: Asia.”
States Change the Way They Slow Spread of Covid-19
Aug.07 — States are adopting social distancing and mask-wearing guidelines until a Covid-19 vaccine becomes available.
Levi’s CEO on Using TikTok to Reach Consumers
Aug.07 — Chip Bergh, chief executive officer of Levi Strauss & Co., discusses using social media to reach consumers, and how the company will use technology to update the making of traditionally analog denim. He speaks with Bloomberg’s Emily Chang.